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Senator Seeks to Export New Jersey’s High Property Tax Burden

2 min readBy: Gerald Prante

Currently, the federal taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code allows for only those who itemize on their federal tax return to deduct state and local taxes paid. Now New Jersey Senator Robert Menendez wants to extend this type of poor tax policy (which the President’s Tax Reform Panel suggested eliminating) even further. From the Newark Star-Ledger:

Sen. Robert Menendez wants to give homeowners an extra $500 property tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. even if they don’t itemize their federal taxes.

Republicans are blasting the plan as an election-year ploy and criticizing Menendez (D-N.J.) for voting against a similar idea when he was in the state Assembly.

As state lawmakers took up the issue of property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. reform last week in Trenton, Menendez introduced legislation in Washington, D.C., to provide “direct relief” to New Jerseyans.

“This bill will provide a meaningful federal response to a problem affecting far too many homeowners in our state,” he said yesterday in Newark at a news conference to tout the plan.

But state Sen. Tom Kean Jr. (R-Union) says Menendez, as a state assemblyman in 1990, voted to eliminate property tax deduc tions on state returns as part of the Florio tax increases.

He “has amassed a lengthy record of voting for higher taxes,” said Kean, who is challenging Me nendez for his Senate seat. “So it’s hard to take him seriously when he races to the microphone in the toughest election fight of his life to call out for tax relief.” (Full Story)

It’s fairly simple as to why a member like Menendez would oppose a tax deduction in the New Jersey tax code while a state legislator yet support a tax deduction at the federal level. It’s because at the federal level, the entire country will bear the cost of that deduction, while a tax deduction as part of the New Jersey tax system will be borne almost entirely by other New Jerseyans. That is, Menendez is trying to export New Jersey’s disproportionately high property tax burden to the rest of the country through what may appear to some to be a “tax cut.”

The federal deduction for state and local taxes makes all of the taxpayers across the country foot the bill for local government spending, which lowers the price paid at the local level for additional projects, thereby encouraging a greater-than-optimal level of local government spending. And this is why members of Congress from high-tax states would obviously want to expand this deduction at the federal level for their constituents who may benefit from that high level of government services, yet would not have to bear the full cost.